Taxable Equivalent Yield Calculator
Calculate the taxable equivalent yield of a tax-free investment to compare it with a taxable investment, considering your marginal tax rate.
Published by:
isCalculator Editorial Team
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How to use this tool?
This calculator determines the taxable equivalent yield of a tax-free investment (like a municipal bond) based on your marginal tax rate.
- Enter Tax-Free Yield (%): Input the yield of your tax-free investment (e.g., 3.5).
- Enter Your Marginal Tax Rate (%): Input your highest tax bracket percentage (e.g., 24). Must be between 0 and 100.
- Click "Calculate": The taxable equivalent yield is displayed. It represents the yield a taxable investment would need to match the tax-free return.
Formula: Tax-Free Yield / (1 - Tax Rate)
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Frequently Asked Questions
It is the yield that a taxable investment must offer to equal the after-tax return of a tax-free investment, given your marginal tax rate.
The formula is: Taxable Equivalent Yield = Tax-Free Yield / (1 - Tax Rate). For example, a 3% tax-free yield at a 24% tax rate equals 3.9474% taxable yield.
It helps investors compare municipal bonds (tax-free) with corporate bonds (taxable) to determine which offers a better after-tax return.
